10.WORKERS’ COMPENSATION AND PNEUMOCONIOSIS

The changes in the workers’ compensation liability (including current and long-term liability balances) for each of the periods presented were as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014

Beginning balance	$	58,198		$	62,989		$	57,557		$	62,909
Accruals increase	3,500			5,281			6,167			7,464
Payments	(2,100		)	(2,778		)	(4,614		)	(5,527		)
Interest accretion	489			647			977			1,293
Valuation gain (1)	(4,416		)	(4,624		)	(4,416		)	(4,624		)

Ending balance	$	55,671		$	61,515		$	55,671		$	61,515

(1)

The liability for the estimated present value of current workers’ compensation benefits is based on the ARLP Partnership’s actuarial estimates. The ARLP Partnership’s actuarial calculations are based on a blend of actuarial projection methods and numerous assumptions including claim development patterns, mortality, medical costs and interest rates. The ARLP Partnership conducted a mid-year review of its actuarial assumptions which resulted in a valuation gain in 2015 primarily attributable to favorable changes in claims development and an increase in the discount rate used to calculate the estimated present value of future obligations from 3.41% at December 31, 2014 to 3.71% at June 30, 2015. The ARLP Partnership’s mid-year 2014 actuarial review also resulted in a valuation gain primarily attributable to favorable changes in claims development, offset partially by a decrease in the utilized discount rate from 4.11% at December 31, 2013 to 3.67% at June 30, 2014.

Certain of the ARLP Partnership’s mine operating entities are liable under state statutes and the Federal Coal Mine Health and Safety Act of 1969, as amended, to pay pneumoconiosis, or black lung, benefits to eligible employees and former employees and their dependents. Components of the net periodic benefit cost for each of the periods presented are as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014

Service cost	$	732		$	857		$	1,464		$	1,714
Interest cost	523			565			1,047			1,131
Amortization of net actuarial gain (1)	(112		)	(263		)	(225		)	(526		)

Net periodic benefit cost	$	1,143		$	1,159		$	2,286		$	2,319

(1)

Amortization of net actuarial gain is included in the operating expenses line item within our condensed consolidated statements of income.